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Japanese Bank Invests In Morgan Stanley

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The Associated Press

The Tampa Tribune

Published: October 14, 2008

NEW YORK - Morgan Stanley got a much-needed cash infusion on Monday, raising $9 billion by selling preferred shares to the Japanese bank Mitsubishi UFJ Financial Group Inc.

The closing of the deal comes a day earlier than expected, and with revised parameters for what Mitsubishi will receive for its investment. Morgan Stanley's shares surged.

The deal, which gives Mitsubishi a 21 percent stake in Morgan Stanley, was revised after Morgan Stanley lost nearly 60 percent of its value last week amid speculation the deal would not close.

Shares of Morgan Stanley rose $8.12, or 84 percent, to $17.80 at the close of trading Monday on the New York Stock Exchange.

The revised deal is more attractive to Mitsubishi because it involves only preferred stock, instead of a mix of preferred and common stock. That enables Mitsubishi to receive dividends on the entire investment. A portion of the preferred stock is convertible to common stock under the revised deal.

As part of the revised deal, Mitsubishi will receive $7.8 billion in convertible preferred stock that carries a 10 percent dividend and is convertible at a price of $25.25 per share. The Japanese bank will also receive $1.2 billion in nonconvertible preferred stock, which also carries a 10 percent dividend.

The deal came as the credit crisis worsened; competitor Lehman Brothers Holdings Inc. filed for bankruptcy and Merrill Lynch & Co. was sold to Bank of America Corp.

Morgan Stanley changed its status to a bank holding company, which will allow it to create a large deposit base, amid fears that stand-alone investment banks might no longer be viable operations.

Mitsubishi is one of the world's largest banks with $1.1 trillion in deposits.

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